No immediate plans for AAPT sale

Telecom New Zealand has no immediate plans to sell its troubled Australian business following the completion of a strategic review into AAPT's future. "The strategic review we announced in December is now complete, and that process has confirmed continuing to hold and invest in the Australian business," Telecom's chief executive Theresa Gattung said in a statement to the Australian Stock Exchange this morning.

Telecom New Zealand has no immediate plans
to sell its troubled Australian business following the completion
of a strategic review into AAPT's future.

"The strategic review we announced in December is now
complete, and that process has confirmed continuing to hold and
invest in the Australian business," Telecom's chief executive
Theresa Gattung said in a statement to the Australian Stock
Exchange this morning.

Telecom said in December it was examining merger, divestment
or retention options for AAPT.

"The review process resulted in a number of proposals from
several parties but these proposals did not meet the group's
requirement from a value or strategic perspective," Gattung
continued.

Telecom is believed to want to retain a foothold in Australia due to the need to maintain services to key trans-Tasman enterprise clients such as the Commonwealth Bank.

"However we believe that further industry consolidation is
both a desirable and a realistic prospect in the future," Gattung continued.

Telecom takes AAPT profit hit
Telecom's continuing ownership of AAPT resulted in a hit to
the Kiwi carrier's wallet, according to financial results
announced today.

While Telecom itself increased its earnings before interest,
tax, depreciation and amortisation (EDITDA) by several percentage
points for the nine months to March 31 this year, AAPT saw a
decline in earnings.

According to Telecom's statement, this was caused by "adverse
changes in the [Australian] competitive environment and wholesale
arrangements".

"The March quarter results were impacted by a significant
tightening of wholesale prices and terms with Telstra, continued
downward pressure on retail prices and the deferral of major
project expenditure by key enterprise customers of Gen-i
Australia," Telecom's statement said.

In addition, Telecom endured a NZ$897 million January
write-down of the value of its Australian operations.

Despite this, Gattung said Telecom was continuing to invest in
Australia.

"In Australia we are continuing with our investment programme
in product, channel and back-office capability as outlined
earlier and continue to reposition the business around mass and
managed segments," she said.

According to the statement, as at 31 March this year AAPT had
81,000 consumer broadband customers and 93,000 consumer dial-up
customers. The company is adding 7,000 broadband customers per
month.

In addition, at that same time AAPT had 451,000 fixed-line
telephony customers.

AAPT's revenue from business customers declined 5.8 percent to
AU$474 million for the nine months to 31 March, with a total of
15,000 business customers, an increase of 44 percent compared
with the previous year.

AAPT said the business revenue decline reflected price
pressures across most product lines, reduction in business from
customers such as Toll, VicOne and Customs Tradegate, as well as
a deferral of some projects coming from the Commonwealth
Bank.